A Company Has Significant Uncapitalized Operating Leases A) Option a
B) Option B
C) Option C
D)

question 92

Multiple Choice

A company has significant uncapitalized operating leases. This company has positive net income. If these were capitalized the effect on the following ratios would be: $$\begin{array} { | l | l | l | } \hline & \text { Times interest earned } & \text { Debt/equity ratio } \\\hline \text { A) } & \text { Increase } & \text { Increase } \\\hline \text { B) } & \text { Increase } & \text { Decrease } \\\hline \text { C) } & \text { Decrease } & \text { Decrease } \\\hline \text { D) } & \text { Decrease } & \text { Increase } \\\hline\end{array}$$

• A) Option A
• B) Option B
• C) Option C
• D) Option D
• Horace Corporation has $200,000 of convertible 5% bonds. Each $500 bond is convertible into 50 shares of common stock. The bonds were sold at par and are currently trading at par, and the required return on nonconvertible bonds of similar risk is 11%. Common stock is trading at $ 23 per share.

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